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Bankruptcy Law Blog

Monday, October 16, 2017

This Is Heartbreaking

There are plenty of people the bankruptcy system fails. Sadly, those people are often poor African Americans. A recent article in The Atlantic Monthly revealed this problem that is so evident to those of us working in the system to the rest of the world by doing a deep dive into the Memphis courts, which are notorious for being full of repeat filers who are just trying to keep their utilities on.

A big focus of the article is on the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy. Basically, under Chapter 7 most debts are forgiven right away, while under Chapter 13 the debtor enters a repayment plan that can last for several years before any debt is forgiven. The article points out that if you don’t keep up with your Chapter 13 repayment plan, your case gets dismissed and you end up in a worse spot than you were in to begin with.

The article argues some debtors are being set up for failure because their attorneys are pushing them to file under Chapter 13 instead of Chapter 7. The authors suggest attorneys are pushing for Chapter 13 because it involves an installment payment plan and $0 down instead of an upfront payment to the attorney, which ensures the attorney has a steady stream of cash and perhaps sounds like a good deal to someone who can’t come up with a lump sum payment.

This is really frustrating. Nobody should ever be pushed into making a legal decision that is not in their best interest in the long term because, or guided toward a decision that benefits the attorney more than the client.

There are benefits and drawbacks to both chapters of the bankruptcy code, and a good attorney will go over them with a potential client, highlighting how the specifics of a particular debtor’s situation make one chapter more attractive than the other. The attorney should offer advice, not coerce a debtor to file under one chapter or another. Debtors should never forget that the attorney they hire is supposed to be working for them, not the other way around.

 


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”